Tax Tribunal Decision: Hearing Rights, Deduction Disallowance, Block Assessment, Prior Expenses

The case involved issues regarding lack of reasonable opportunity of hearing by the CIT, disallowance of deduction u/s 80-O, inclusion of income in block assessment u/s 158BC, disallowance of prior period expenses, and inclusion of income for a specific period. The Tribunal held that the order was proper regarding the lack of hearing opportunity, disallowed the deduction u/s 80-O, deemed inclusion of income in block assessment improper, and disallowed prior period expenses. The income for the specific period was included in the relevant assessment year. The appeal was partly allowed.

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Issues Involved:
1. Lack of reasonable opportunity of hearing by the CIT before according approval to the impugned order.
2. Disallowance of the claim of deduction u/s 80-O of the IT Act.
3. Inclusion of income for the assessment years 1994-95, 1995-96, and 1996-97 in the block assessment u/s 158BC.
4. Disallowance of Rs. 1,90,433 as prior period expenses on traveling and telephone.
5. Inclusion of income of Rs. 1,09,960 for March 1993 in the income for the assessment year 1994-95.

Summary:

1. Lack of Reasonable Opportunity of Hearing by the CIT:
The assessee objected that it was not provided a reasonable opportunity of hearing by the CIT before the approval of the assessment order. However, it was noted that u/s 158BG, the Assessing Officer had passed the impugned order after obtaining the previous approval of the CIT, and there is no provision for giving an opportunity of hearing by the CIT before according approval. Hence, the order was held proper and valid on this ground.

2. Disallowance of the Claim of Deduction u/s 80-O:
The assessee claimed deduction u/s 80-O for providing technical, commercial, and industrial knowledge to foreign companies. The Assessing Officer disallowed the claim, stating that the services rendered by the assessee were not technical or professional services and were rendered in India, not from India. The Tribunal held that the assessee had rendered technical or professional services to the foreign enterprises but these services were rendered in India, not outside India, as required by Explanation (iii) to section 80-O. Therefore, the payments received by the assessee from the foreign enterprises were not entitled to exemption u/s 80-O.

3. Inclusion of Income in the Block Assessment u/s 158BC:
The Tribunal held that the inclusion of income for the assessment years 1994-95, 1995-96, and 1996-97 in the block assessment u/s 158BC was not proper. The assessee had filed returns for these years before the date of the search or before the completion of the block assessment. The disallowance of the claim of exemption u/s 80-O could not be treated as detection of concealed income and did not fall within the definition of "undisclosed income" u/s 158B. Therefore, the income should be considered in the respective assessment u/s 143(3) of the IT Act.

4. Disallowance of Rs. 1,90,433 as Prior Period Expenses:
The Tribunal held that the disallowance of Rs. 1,90,433 as prior period expenses on traveling and telephone for the assessment year 1994-95 was not liable to be included in the block assessment for reasons similar to those given above.

5. Inclusion of Income of Rs. 1,09,960 for March 1993:
The Tribunal held that the income of Rs. 1,09,960 received in March 1993 was includible in the assessment year 1994-95 as shown by the assessee because the accounting period relevant to the assessment year 1994-95 was from 2-3-1993 to 31-3-1994.

Conclusion:
The appeal was partly allowed.

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